Lordstown Motors (NASDAQ:RIDE), housed in a former General Motors (NYSE:GM) assembly plant, has begun trading with a market capitalization of $460 million. RIDE stock opened Oct. 29 at about $14.50 per share.
GM is backing the start-up, which merged with a Special Purpose Acquisition Company (SPAC) called DiamondPeak to go public this week.
It’s all part of a frenzy of electric-car financing, as investors continue to reject the old gas-powered giants and search for someone who might compete with Tesla (NASDAQ:TSLA). Nikola (NASDAQ:NKLA) went public earlier and is now part-owned by GM. A company called Fisker is also trying to go public through a SPAC.
What Lordstown Has to Offer
Lordstown has a design for an electric truck that looks more like a standard model than the Tesla Cybertruck, which is made out of thick sheet metal that doesn’t bend easily.
CEO Steve Burns says that what will distinguish his truck, called the Endurance, is its price. At $45,000 it’s directly price-competitive with gas-powered models from GM and Ford.
The company is targeted at large fleet-buyers, claiming the Endurance gets the equivalent of 75 miles per gallon of fuel. Burns says 40,000 units have been pre-ordered, worth $1.4 billion. Cincinnati Bengals quarterback Joe Burrow, an Ohio native, has been signed as spokesman for the truck.
David Hamamoto, the man behind DiamondPeak, is a former real estate executive whose NorthStar real estate empire had merged in 2016. Hamamoto resigned from it in 2017. He is also a former executive with Goldman Sachs (NYSE:GS). DiamondPeak was formed in 2019 specifically to merge with a private company like Lordstown.
InvestorPlace writers hold different opinions about the new company.
Louis Navillier loves it. He likes the market and notes that those who bought DiamondPeak shares before the merger saw them rise, at one point, to over $30 each. He noted that the merger brings Lordstown $675 million in cash to get Endurance into production.
Alex Sirois is more skeptical. He likes the fleet vertical because it means Lordstown doesn’t have to build a dealer network. But he notes that reservations to buy the truck cost just $100, so it’s a deal people can get out of. He also notes that fleet sales are a very competitive business. It’s an important niche for both GM and Ford.
My Best Guess
I suspect that all these start-ups — Nikola, Lordstown and Workhorse Group (NASDAQ:WKHS) — are actually stalking horses in Detroit’s effort to catch Tesla.
Not that there’s anything wrong with that. Wall Street has turned thumbs down on Detroit’s plans for electrics, but it seems to love electric vehicle start-ups. The combined value of all three companies comes to about $13 billion. This means Detroit can afford to buy them out, and GM already has a deal in place with Nikola, which is the most valuable of the three.
But for all the speculation around support from President Donald Trump’s administration, or the possibility of a U.S. Postal Service contract, Tesla remains the 800-pound elephant in the space.
Tesla is now to these start-ups what GM was to Tesla just a few years ago. Tesla is scaled. It has the brand name, and it has the market.
If Lordstown can get trucks out the door, the best thing for it might be to be bought by one of the Detroit companies. The ceiling, in short, is limited.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.